Stop me if you’ve heard this one before. In America’s most lucrative drinks market, a multi-billion-dollar beverage-alcohol heavyweight coordinated behind the scenes to get its hands on one of the country’s most lucrative brands.
The story may sound familiar to brewing-industry insiders, and it should. After all, it wasn’t even a decade ago that Reyes Beverage Group (RBG), subsidiary of the sixth-largest privately held company in the United States and by far its largest beer distributor, forced smaller wholesalers in California to sell their rights to Constellation Brands’ red-hot beer portfolio. It was part of a years-long “realignment” that sent shockwaves through every tier of the business.
Today’s column isn’t about that, not directly at least. Having consolidated its hold on the Golden State’s supply of Modelo, RBG set about securing more brand rights across state and category lines. Earlier this week, it announced it’d bagged a big one. Tito’s Handmade Vodka, the best-selling liquor in the U.S., is jumping ship truck from its current California distributor, Republic National Distributing Company, in favor of the middle-tier juggernaut Mexican lager built.
RBG said it was “honored and excited” about the deal in a boilerplate statement circulated to some press outlets. (The firm did not reply to Hop Take’s request for comment, nor did Tito’s.) To the victor go the spoils; from the victor come the crowing press releases.
Mature bev-alc brand rights are a zero-sum game. When RBG wins — and it often does, though not always, as Anderson Valley Brewing Company proved in court last year — somebody loses. Triangle Beverage was one of the Constellation wholesalers on the wrong end of the 2018 deal; after losing 3.4 million cases’-worth of business, it laid off 100 people, roughly half its workforce. (Today, it no longer exists. The experience prompted its former president, Peter Heimark, who still owns and operates his family’s eponymous distributorship, to form a wholesaler coalition called California Beverage Solutions in 2023.)
This time around, RBG picked on somebody its own size — Republic National Distributing Company (RNDC), second only to Southern Glazer’s Wine & Spirits (SGWS) in the non-beer lane — but the outcome is more or less the same. As BevNet’s Ferron Salniker reported last week, RNDC filed a Worker Adjustment and Retraining Notification (WARN) notice with Golden State officials on Jan. 7 signaling it would cut 60 workers on March 8. It’s slated to turn Tito’s over to RBG’s California arm on April 1.
“These steps are crucial for RNDC’s long-term success in a competitive market,” the firm said in a statement provided to BevNET. (A spokesperson for the distributor acknowledged Hop Take’s initial inquiry, but didn’t respond substantively before publication.) No crowing there.
Stories about terminations and machinations like this are not sexy, but they matter, and not just because they affect scores of livelihoods and millions of dollars of business. The middle tier is the crucible of the American bev-alc industry, and California, a frequent harbinger of its broader tectonic shifts. So it’s worth teasing out the themes animating Tito’s RNDC-to-RBG defection, and putting them in historical context to examine the changing nature of power in the booze business, and how it’s reshaping the market for players large and small.
The first — and oldest — major dynamic driving this deal is the changing nature of the three-tier system itself. The states all have different versions, but they all share a basic post-Prohibition logic of preventing imbalances in the market from vertical integration of America’s alcohol supply chain. Local, independent distributors, acting as brokers between well-capitalized and more sophisticated suppliers and mom-and-pop retailers, could level the board between the two and provide a stable, in-market gatekeeper to prevent either from flooding the streets with hooch. (Or to hold accountable when they did anyway.)
Whether that logic still holds a century later is an extremely contentious subject (I’ll probably even get some emails complaining about how I summarized it), but nobody really debates that the nature of the tiers themselves have morphed dramatically. The script has flipped from a few big suppliers and many small distributors and retailers, to… well, basically the opposite of that. You know what consolidation in retail looks like because it affects how and where you buy alcohol — see the rise of Walmart and Costco, or Kroger’s case for its now-86’d Albertsons acquisition. But the middle tier has been quietly consolidating apace, too.
Examples abound, but this being a beer column about RBG, let’s consider that firm’s growth. The American Prospect found that it bought 17 distributorships in California alone in the four years after it cadged Constellation off Triangle et al. A 2022 report by the U.S. Treasury Department identified 37 Reyes distribution facilities across seven states; when it pushed into Texas that year, Good Beer Hunting’s Kate Bernot noted that the 16 million cases’ worth of business it picked up in the state via M&A was “roughly equivalent to the total volume of Miller High Life sold in the U.S. in the first nine months.” I have yet to encounter an account of the three-tier system’s genesis that suggests its architects anticipated wholesalers like RBG. Coupled with the middle tier’s statutory role as the bev-alc market’s fulcrum, multi-state mega-distributors’ sheer size has shifted the locus of power within the three-tier system in their direction.
Still, RNDC is no babe in the woods. It’s a 14,000-person firm with operations in 39 states, and is itself the product of big-dollar M&A. But not all distributors are the same, and the fact that RBG’s core business is moving beer gives it a leg up on its liquor-lugging brethren. Thus, the second theme laid bare by its tête-à-tête with Tito’s: the improbable ascent of beer distributors over their wine and spirits counterparts. “People used to assume that the huge multi-billion dollar wine and spirits wholesalers would eventually take over beer distribution,” mused Harry Schuhmacher, founding editor of Beer Business Daily, in his coverage of the deal last week. “It turns out that the franchise value of beer is actually incenting the reverse to happen.”
He’s referring to the set of laws on the books in nearly every state in the country (though not California) that grant beer distributors special protections from being terminated by their brewer clients — i.e., from getting Tito’d like RNDC just did. Franchise is a whole “thing,” and I don’t want to get stuck in the weeds here, but the important points here are that a) these protections have stabilized beer wholesalers’ portfolios for decades of compounding growth, and b) wine and spirits wholesalers do not enjoy nearly the same breadth or depth of protection (where they do at all). The beer franchise — a sacred cow won via coordinated state-by-state political action throughout the back half of last century — has given beer distributors financial and structural edges over their middle-tier frenemies that RBG has excelled at marshaling to its advantage at scale.
“It’s very possible that beer distributors win this whole thing,” Boston Beer Co. co-founder and chairman Jim Koch told the audience at Beer Marketer’s Insights’ annual conference last spring, adding “the deck is stacked in their favor.” I think that’s right, for the reasons above, and one more that becomes obvious when you evaluate the brands leaving RNDC for RBG.
The “total beverage” future is here, and the consumer demands that brought it about — more single-serve and ready-to-drink packages, more low-brow/high-ABV value-propositions, more convenience store placements — match up nearly perfectly with beer distributors’ core culture and logistical skillset. (Not to mention rolling stock, routes, etc.) It’s also easier for beer distributors to develop comparatively low-volume and -velocity liquor and wine sales expertise than vice versa, and the price mixes of those categories make it worth doing.
Woe to RNDC, which has struggled more than SGWS (and much more than Breakthru Beverage Group, hot on its heels as the country’s No. 3 wine/spirits distributor) to meet the bev-alc market’s “everything everywhere all at once” moment. Tito’s is just the latest supplier to reroute its Cali business (where, as Schuhmacher noted, beer and spirits have considerable retail overlap) to RBG. BuzzBallz, the obscenely successful c-store orb-slinger, did likewise in the Golden State and three others in August 2024, shortly after being acquired by The Sazerac Company — which itself had already pulled its portfolio from RNDC there (and Hawaii, and parts of Texas) at the end of 2022. (Remember, the liquor conglomerate is also one of the country’s biggest “beer” producers, via Fireball’s malt-based simulacrum.)
Whether Tito’s pulls the rest of its RNDC business — or in BBD’s insider parlance, gives them “the treatment” nationwide — remains to be seen, and ditto whether more suppliers do likewise. But this is a brave new total beverage world, and RBG is built to rule it. Expect to hear this story again.
🤯 Hop-ocalypse Now
There are few bright spots in the American beer market these days, and one of them is dark as night: Guinness. Sales and cultural cachet are surging apace for the iconic Irish stout as drinkers on both sides of the pond split the G. The Guinness-ance is good news both for a flagging U.S. beer category still stumbling through the post-pandemic on-premise landscape, and for the brand’s parent company, Diageo, execs of which have struggled to shore up its liquor-heavy portfolio in the face of global pullbacks in that category. And yet: Last weekend, Bloomberg reported that a spinoff of the beloved beer brand is on the table during the British booze behemoth’s current portfolio review. Diageo no-commented at first… then issued a statement after it hit the wire this past Sunday insisting it had “no intention” of selling. Hmm!
📈 Ups…
San Francisco’s iconic Toronado Beer Bar is officially for sale as owner Dave Keene eyes retirement after 38 years… Whole Foods workers in Philadelphia voted to go union with the United Food and Commercial Workers… Molson Coors landed “commercialization rights” for Fever-Tree’s stateside business…
📉 …and downs
Fair State Brewing Cooperative is shuttering its production plant in St. Paul, Minn., though the taproom will keep on pouring… The National Beer Wholesalers Association announced former Trump mouthpiece Kellyanne Conway will deliver “insider insights” at its April legislative conference…
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